Tax experts oppose revival of concessionary SROs

KARACHI: Tax experts are surprised over the changes introduced through the finance bill, regarding revival of statutory notifications, which were done away with in order to eliminate SRO culture in the country, a statement said on Saturday. 

“The revival of SROs raises questions about the concessionary notifications, which were deleted in the past years, while taxpayers were charged with normal tax,” Zeeshan Merchant, general secretary, Karachi Tax Bar Association (KTBA) stated. 

“My question is: will the tax authorities refund the additional amount collected after rescinding the SROs?” 

Merchant went on to say the amendment had been proposed through the finance bill to give shelter to SROs, which were implemented without parliamentary approval.

“The Supreme Court had barred Federal Board of Revenue (FBR) from implementing SROs without parliamentary approval,” the tax lawyer leader said.

According to experts at AF Ferguson & Co Chartered Accountants, the process of providing exemption and tax concessions in the Second Schedule of Income Tax Ordinance 2001 was subject to the prescribed procedure.

“In the present circumstances such process requires the approval of the federal government, which was held by the Supreme Court of Pakistan, that it could only be the Prime Minister and his cabinet,” the experts added.

They continued that now, the process of exemptions and tax concessions can be initiated by the FBR with the approval of the Minister In-charge subject to approval of Economic Coordination Committee (ECC).

“Consequently any notification issued from July 1, 2016 onwards is validated through this amendment up to June 30, 2018,” the experts from AF Ferguson & Co Chartered Accountants said adding, similar amendments have also been made in Customs, Sales Tax and Federal Excise Act. 

On the other hand, tax analysts at EY Ford Rhodes Chartered Accountants explained that all notifications issued with the approval of the ECC were required to be placed before the National Assembly for ratification. 

“However, in case, such a notification, issued by the federal government, is not ratified by the parliament, it stands rescinded at the end of the financial year in which it was issued,” they added. 

Keeping in view the long-drawn-out process of getting the exemptions legislated, the said powers of the federal government and the procedure thereof was criticised by different quarters. 

The KTBA officials also said that validating the expired SROs would increase the litigation from those taxpayers, who were eligible for concessionary rates but paid higher amount of tax than what was required.